Amanda Young: How you can make money and make a difference

Amanda Young: How you can make money and make a difference

OCTOBER has seen a number of exciting initiatives in the UK, including Good Money Week and Green GB Week. These weeks are designed to encourage people to think about where their money is invested and how companies are approaching environmental and climate change issues.

There have been many interesting developments in the ethical sector over the last 20 years and the internet is transforming the way people choose to invest. There is no doubt that people are becoming more values-driven in their outlook and this is definitely feeding into how they think about their investments. As interest continues to grow, so does the range of investment options that can meet individual values and beliefs. We are seeing a growing choice in ethical, responsible, sustainable and values-driven investment options.

A big driving force is that companies cannot operate in isolation anymore – nowadays their businesses, the types of products they manufacture and how they operate are all under the public gaze. This is largely due to the rise of the internet and ease of access to information, but it is also because of increased awareness of the problems of the world.

The three key ethical challenges facing investors are: growing concern about climate change; growing social inequalities within society; and production and consumption rates given the world’s limited resources. The rise in knowledge and understanding of the causes of these problems has definitely increased questions about investments in certain companies, sectors and countries.

Over the past 20 years, the level of disclosure from companies about their operations has increased substantially. This is largely due to shareholders asking for more information from companies on how they are looking after the environment, their employees and the communities in which they operate.

BP’s Deepwater Horizon oil spill is a great example of how, within hours of the first spill, there were stories circulating on social media about the initial leak. Nowadays, companies need to have greater transparency of and greater accountability for their operations.

For me, the biggest achievement in the industry in recent years is the increase in shareholder dialogue with management, and company boards taking increased ownership of environmental and social matters. A decade or two ago, if you had asked the CEO of a mining company whether they had an environmental policy, most of them would have looked at you oddly.

Luckily, many company boards now have very different attitudes and understand that not only is behaving responsibly the right thing to do for the environment and society, it’s the right thing to do for the financial value and long-term sustainability of their businesses.

There are many ‘good’ investment options on the market but, like all investments, performance can vary. So it is important to consider the investment over the longer term and understand the investment manager’s strategy.

That said, there are ethical funds that have been around for 20 years that exclude a large part of the market and have produced competitive returns over this period. This shows that you absolutely can invest alongside your values without sacrificing the potential to make money.

The growth of impact investing is the latest part of the sustainable investment movement and it is a very exciting development. Recently, we have witnessed a growing movement towards investments which set out to have an intentional, measurable and positive environmental or social impact, as well as seeking a financial return.

It is really positive to see more and more investment strategies that are actively seeking out positive impacts, rather than just thinking about which industry sectors or companies not to invest in.

Amanda Young is head of global ESG investment research at Aberdeen Standard Investment.

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